. /.  WORLD TRADE  
ORGANIZATION  WT/CFMC/W/25* 
14 May 2008 
 
 (08-2224) 
 Original:   English 
  
 
DIRECTOR-GENERAL'S CONSULTATIVE FRAMEWORK 
MECHANISM ON COTTON 
 
Evolving Working Table
 
 
Item 3(c).  Flexibility in the Use of Debt Relief Initiatives Resources 
 
Statement by the IMF (Mr. Geoff Barnard) at the  
8th Round of Consultations, 18 June 2007  
 
 1. At the High-Level Session in March 2007, some  questions were raised about the MDRI, 
particularly the constraints, if any, on its u se, the relationship between MDRI resources and cotton 
development assistance; and on whether MDRI entr ies should be accommodated in the Evolving 
Table, and if so, what the right values should be.  The WTO Secretariat in its introductory remarks to 
this item has provided an accurate essential summary of the key points on this issue. 
2. The 2005 G8 Gleneagles Summit Communiqué a nd the subsequent IMF and World Bank 
documents establishing the MDRI specify that the resources to be freed from the MDRI are intended 
to be used for countries in the achievement of the Millennium Development Goals (MDGs).  The use 
of the resources freed from the MDRI is, therefore,  linked to the achievement of the MDGs and not 
completely unconstrained.   
3. In addition to the MDGs link, the MDRI is also  related to the HIPC initiative.  This initiative 
provides debt relief from bilateral and multilateral cr editors according to a number of criteria.  Under 
the MDRI, the IMF and the World Bank cancel all out standing debt of eligible countries when the 
completion point under the HIPC initiative is reached .  In order for countries to reach their HIPC 
completion point, they have to establish a track record of performance in macroeconomic policies, 
implementation of a poverty reduction strategy, and public expenditure management systems.  This 
provides an assurance to creditors that recipient countries will use debt relief efficiently and in the 
manner intended.  Therefore, MDRI assistance is granted for a specific purpose and on the basis of specific conditions.  
4. It may be noted that while the MDRI and HI PC initiatives establish conditions for granting 
debt relief, this relief is a one-o ff stock of debt reduction which, ha ving been granted, will not be 
reversed.  In this sense, therefor e, there is no ongoing or forward- looking conditionality.  The MDRI 
does provide for monitoring by IMF and World Bank sta ff in order to inform the respective Boards of 
the two institutions about MDGs-relat ed spending in recipient countries,  but this is not directly tied to 
new assistance flows. 
 
 
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 * This document has previously been issued under the symbol WT/L/689. WT/CFMC/W/25 
Page 2  
 
  5. Can support for the cotton sector be a component of a country's strategy to meet the MDGs 
and, therefore, a legitimate use of resources freed up fr om the MDRI?  In our view, the answer is yes.  
For example, if cotton sector development is iden tified as priority in a country's Poverty Reduction 
Strategy (PRS), this is prima facie  evidence that it is an element in the country's strategy in achieving 
the MDGs.  In the view of the IMF and the Worl d Bank, beneficiary countries themselves are best 
placed to identify their priorities.   
6. What, then, is the best approach to determin ing values relating to the MDRI in the Working 
Table? First, I would note that the approach s hould be consistent for the IMF and the World Bank, 
and indeed for the African Development Fund (ADF),  which is also a provider of MDRI assistance.  
Since the guidelines for the IMF and the World Bank regarding the MDRI are equivalent, the same 
approach to MDRI assistance fro m the two institutions should be adopted in the reporting and 
interpretation of MDRI values in Part III of the Ta ble. In the current version of the Evolving Table 
(WT/L/684), Part III shows only the values provided by the IMF under the MDRI.  The World Bank 
has, however, now forwarded to the WTO Secretariat information on its MDRI assistance, which will 
be reflected in the next version of the Evolving Table.   
7. What should the approach be in reflecting MDRI  resources in the column:  "Status of Cotton 
Available Amounts" in Part III of the Table?  The IMF and the World Bank consider that the 
approach should be governed by the principle that MDRI resources should only be entered as 
available for cotton development assistance if there is an accompanying statement that MDRI resources are intended to be used to achieve the MD Gs and that cotton sector development could be a 
component of a national strategy to that end.  For example, such a statement could be reflected in a 
footnote.  It would then be up to the recipient country to provide the answer as to how much, if any, of 
the total value of MDRI assistance is available for and allocated to cotton sector development.  If the recipient countries decide that no resources would be committed to cotton, that would be their own legitimate decision.  The IMF and the World Bank  have no interest in overstating the values for 
cotton-related assistance.  
8. The IMF concurs with the statement by the World Bank relating to general budgetary support, 
which in the case of the IMF relates to assistance  from the Poverty Reduction and Growth Facility 
(PRGF).  Analogously to the suggested approach fo r the MDRI, the IMF would provide the value of 
total PRGF flows to cotton-producing countries, but the attribution of cotton-specific support within 
those total amounts should be undertaken by the recipient countries themselves. 
9. Progress has been made on cotton development assi stance in this evolving approach. The IMF 
and the World Bank have outlined their suggested approach on debt relief and budgetary support, and 
are providing global amounts in Part III of the Table.  The next stage is for the recipient countries to 
identify the actual amounts corresponding to cotton sector development.  
 
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